Energy Services International Pty Ltd v Energy Services Invironmental Pty Ltd [2003] ACTSC 103 (5 December 2003)

Last Updated: 28 January 2004

ENERGY SERVICES INTERNATIONAL PTY LTD v ENERGY SERVICES INVIRONMENTAL PTY LTD [2003] ACTSC 103 (5 December 2003)

EX TEMPORE REASONS FOR JUDGMENT

No SC 466 of 2003

Judge: Crispin J

Supreme Court of the ACT

Date: 21 November 2003

IN THE SUPREME COURT OF THE )

) No. SC 466 of 2003

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: ENERGY SERVICES INTERNATIONAL PTY LTD

Plaintiff

AND: ENERGY SERVICES INVIRONMENTAL PTY LTD

Defendant

ORDER

Judge: Crispin J

Date: 21 November 2003

Place: Canberra

THE COURT ORDERS THAT:

1. the plaintiff have leave to enter judgment against the defendant in the sum of $93,750;

2. the comparable amount paid into court be forthwith paid out to the plaintiff;

3. the application for security for costs be dismissed;

4. costs be reserved.

IN THE SUPREME COURT OF THE )

) No. SC 466 of 2003

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: ENERGY SERVICES INTERNATIONAL PTY LTD

Plaintiff

AND: ENERGY SERVICES INVIRONMENTAL PTY LTD

Defendant

Judge: Crispin J

Date: 21 November 2003

Place: Canberra

EX TEMPORE REASONS FOR JUDGMENT

1. This is a claim for summary judgment. The plaintiff moves upon O 15, r 1, sub r 4 of the Supreme Court Rules which provides that:

On an application under this rule, the court may make such order for the entry of judgment as it considers just having regard to the nature of the remedy or relief claimed, unless the court is satisfied that (a) there is a good defence to the action on the merits; (b) sufficient facts are disclosed to entitle the defendant to defend the action generally, or (c) subrule 5 applies.

2. Subrule (5) deals with a situation where the court considers that the statement of claim should not have been attached to the originating application. This subrule has no application in these present proceedings.

3. Rule 4 Order 15 provides that:

If it appears that the defence set up by the defendant applies only to a part of the plaintiff's claim, or that any part of his or her claim is admitted, the plaintiff shall have judgment forthwith for such part of his or her claim as the defence does not apply to or as is admitted, subject to such terms (if any) as to suspending execution, or the payment of the amount levied or any part thereof into court by the sheriff, the taxation of costs, or otherwise, as the court thinks fit, and the defendant may be allowed to defend as to the residue of the plaintiff's claim.

4. The principles under which applications of this kind are dealt with are relatively well understood and I attempted to summarise them in the case of Peter Richard Glover, Peter Lennox Shiels v Christopher Roche, Barry Joseph Roche, (unreported) ACTSC 19, in which I delivered judgment on 4 April 2003. I adhere to the statement of principles which I provided in that judgment and apply them to the proceedings before me.

5. The plaintiff is a company in liquidation and the defendant is also a company. The statement of claim alleges that by an agreement in writing dated 15 March 2002 between the plaintiff, a Malaysian registered company known as Musteq Energy Services SDN BHD and the defendant, Energy Services International (N2) Pty Ltd, the defendant agreed to purchase a business from the plaintiff for the sum of $630,000. That much is admitted on the pleadings.

6. The statement of claim alleges that it was a term of the agreement that $200,000 of the purchase price would become payable only on the plaintiff giving possession to the defendant of the complete stationary Fluidex PCB Dechlorination Plant, as defined in the agreement, in good working order.

7. Whilst the defence does not admit this statement, it is clear from the terms of the agreement that are annexed to the affidavit of Mr William Rangott sworn on 22 September 2003 that there was such a term. The statement of claim alleges that the purchaser gave the defendant possession of the plant on 23 April 2002 but that the plant was not at that time in good working order.

8. By arrangement with the plaintiff, the defendant put the plant into good working order at a cost to the defendant of $46,978. The plaintiff has agreed to permit the defendant to deduct this amount from the sum of $200,000 referred to in paragraph 3 of the statement of claim. These allegations have also been admitted on the pleadings.

9. The statement of claim alleges that a reasonable time for putting the plant into good working order was a period of three months from the date of possession of the plant, that is by 23 July 2002. The defendant does not admit this, but it is nonetheless clear that, if it was not in good working order by that date, it was by 30 May 2003, and prima facie the balance of the sum of $200,000 less the amount allowed for repairs is now due and payable. Accordingly the plaintiff has demonstrated a prima facie entitlement to judgment for the sum of $153,022.

10. In answer to this claim, the defendant raises a number of issues. Firstly the defendant denies the factual allegations in paragraph 7 of the statement of claim, namely that the defendant has failed to pay the plaintiff the balance of the purchase price and as a result of this is in breach of the agreement. Despite that denial it was conceded in argument before me that the sum of $93,750 was payable to the plaintiff, and I understand the paragraph to be traversed by reason of the more specific issues raised in the defence.

11. The defence also pleads that at no material time has the plaintiff delivered possession of the plant in good working order and contains allegations of breach of warranties and breach of an implied term for setting off the cost of repair. However, subject to the matters that I will deal with later in this judgment, these allegations appear to relate to matters that were the subject of the agreement referred to in paragraph 5 of the statement of claim.

12. The defence also pleads a series of allegations relied upon as set-offs and I will deal with those individually in the course of this judgment. The overall value of those set-offs is said to be $106,250 and it is on the basis that this amount should be deducted from the claimed sum of $200,000 that the remaining sum of $93,750 is conceded to be due and payable.

13. Despite this concession, Mr Spry, who appears on behalf of the defendant, submitted that no order for summary judgment should be made at this stage. He based that submission on two grounds. First he relied upon the fact that the defendant had tendered payment of that sum. For present purposes it is, I think, sufficient for me to say that the tender was, in my opinion, plainly a conditional tender and a conditional tender does not offer a viable defence to a full claim. Furthermore, it was not for the full amount claimed. Second, he relied upon the fact that there had been a payment into court of an equivalent sum. Such a payment into court may, of course, be relevant as to costs but it cannot of itself provide a defence to the claim.

14. I then turn to the particular issues raised in the suggested set offs. The first two items may be conveniently dealt with together. The first is based upon costs incurred in defending proceedings in the Supreme Court of New South Wales. An amount of $55,724.71 was allegedly spent by the defendant in doing so. The second is based upon a further amount of $1,222.44 spent in the assessment of costs payable to the defendant pursuant to a costs order obtained against the plaintiff in the New South Wales proceedings, who, in order to avoid confusion, may be referred to as Ms Sullivan.

15. It is necessary for me to refer briefly to the nature of those proceedings which were heard by the Chief Justice in Equity in the Equity Division of the Supreme Court of New South Wales. Judgment was delivered on 11 October 2002. In delivering judgment his Honour noted that the Company, that is the plaintiff in the present proceedings, had had a contract with Energy Services International Pty Ltd, pursuant to which Integral Energy paid the plaintiff to remove all of its transformer oil from sites in outer Sydney. The transformer oil was contaminated with polychlorinated biphenol, and the contaminated oil was contained in Fullers Earth. The plaintiff had not had a licence to store or transport the hazardous materials in question, and it engaged Ms Sullivan, who runs a transport company and had such a licence, to transport and store the hazardous material.

16. At the time the plaintiff went into liquidation, 481 barrels of contaminated material were stored at Ms Sullivan's depot in a Sydney suburb. On 7 March 2002 the directors of the plaintiff made a declaration of solvency. However, on 25 March 2002 the plaintiff passed a resolution to commence a members' voluntary winding up and Mr Rangott was appointed liquidator.

17. On 28 March 2002 Mr Rangott issued two notices of disclaimer of onerous property in Form 525 to the Corporations Regulations. The two notices were each dated 27 March 2002. The first referred to 481 drums, each of 200 litre capacity, containing PCB contaminated Fullers Earth and associated materials, and the second referred to 48 intermediate bulk containers together with the PCB contaminated transformer oil contained in those containers.

18. On 10 April 2002, Ms Sullivan filed an application claiming a declaration that the notices of disclaimer were ineffective and an order that those notices be set aside. The proceedings before the Chief Justice in Equity then ensued and orders for costs were subsequently made.

19. Mr Spry maintains that his client is entitled to be indemnified in relation to the expenses incurred in defending those proceedings by reason of the provisions contained in clauses 19 and 30 of the agreement between the parties to the present proceedings and by reason of relevant equitable principles.

20. Having regard to the view that I have taken of the matter, it is necessary only for me to refer to clause 19 of the agreement. That clause is in the following terms:

The Vendor will be responsible for all debts and liabilities owing or payable by it in connection with the said Business which shall not have been fully paid, satisfied and discharged on the date of completion and indemnify and keep indemnified the Purchaser from and against all claims, demands, actions, suits and proceedings in respect thereof . . .

21. It is clear from the first schedule to the agreement that the completion date was 15 April 2002. It follows that the proceedings before the Chief Justice in Equity were commenced prior to the completion date specified in the agreement. Accordingly, as Mr Spry has pointed out, the vendor, that is the plaintiff in these proceedings, was responsible for any liabilities that might be so established and was obliged to keep the purchaser, that is the defendant, indemnified from and against all claims, demands, action, suits and proceedings in respect thereof.

22. The proceedings in question were plainly in respect of such liabilities and, accordingly, the plaintiff in my opinion was obliged to indemnify the defendant in respect of the costs incurred by it in being embroiled in those proceedings. It is therefore unnecessary for me to consider the ambit of clause 30 or the equitable principles to which Mr Spry referred.

23. I should also say that, having regard to the fact that the right to indemnity is contained in the same agreement and to the nature of the present proceedings, I am satisfied that the defendant was entitled to maintain a set off as to the value of that indemnity against the unpaid portion of the purchase price. However, that does not, in my opinion, warrant a conclusion that the defendant is entitled to a set off amounting to the total sum obtained by adding the amounts of $55,724.71 and $1,222.44.

24. The orders for costs made in the proceedings before the Supreme Court of New South Wales in my opinion require Ms Sullivan, to pay the defendant's costs of those proceedings. There is no evidence before me to suggest that Ms Sullivan is impecunious or that there is any other reason likely to make that portion of the costs which the defendant is entitled to recover from her, practically irrecoverable.

25. Whilst Mr Spry submitted that, properly construed, the orders required the plaintiff in the present proceedings to pay the defendant's costs directly, I would not construe the orders in that way. It is my opinion that any doubt about the matter is effectively dispelled by his Honour's remarks at paragraph 60 of his Honour's judgment in which he says:

The appropriate order is that the company [that is, the plaintiff in the proceedings before me,] pay the plaintiff's costs [that is, Ms Sullivan's costs,] including the costs she has to pay the third defendant [that is, the defendant in the proceedings before me]. But leave be reserved for the plaintiff to apply for an order for costs against the second defendant liquidator personally should she be so advised.

26. At the present time taxation is not complete and the quantum of the costs which the defendant is likely to recover from Ms Sullivan has not been determined. I do not accept that this means that the defendant has suffered no loss and that there is therefore nothing to set off against the amount claimed for the purpose of an application for summary judgment. On the contrary, the present position is presumably that the defendant has had to pay the costs of that litigation and is out of pocket to that extent or is, at the very least, liable for such amounts.

27. On the other hand, that does not mean that the amount of costs likely to be realised from Ms Sullivan can be simply ignored. The plaintiff will in the long run be entitled to have the set off pleaded against him by the defendant reduced by an amount equal to that which the defendant can properly recover from Ms Sullivan. It may be true that Ms Sullivan herself has the benefit of a costs order against the plaintiff and that this order extends the costs which she has been ordered to pay the defendant. However, that is an issue that arises between the plaintiff and Ms Sullivan rather than between the plaintiff and the defendant.

28. In the circumstances, it seems to me that summary judgment could not presently be given for an amount that would fail to take into account the amounts claimed as the set-off, though it could be possible to give judgment based upon some set off for some lesser amount. I will return to that issue later in this judgment.

29. Second, Mr Spry referred to two amounts, namely $1,729.20 and $595.65 claimed respectively for storage costs in relation to what is described as PCB plant between November 2001 and March 2002 and delivery costs in relation to PCB plant and accessories. I accept Mr Gillespie-Jones' submission that the evidence in relation to these two items put forward by the defendant is unsatisfactory and potentially inconsistent. However, I am conscious of the fact that a defendant is not obliged to adduce all of the evidence that may be admissible in relation to a particular issue in seeking to oppose an application of this nature.

30. The question, it seems to me, is whether the defendant's account of the facts have a sufficient prima facie plausibility to merit further investigation or whether on the other hand, it is so incredible or improbable that there is no reasonable probability of the defendant setting up a defence to the plaintiff's claim based upon the assertions. Despite my concern as to the adequacy of the evidence, I am satisfied that there is an arguable case for a set off in relation to these items or, to put it more precisely, I am satisfied that there is a case that merits further investigation.

31. The final item claimed as a set off consists of the costs of returning the plant to complete and good working order. In respect of this item, the defendant seeks only a set off that has already been conceded in the statement of claim, namely the sum of $46,978, and accordingly I need consider this issue no further.

32. Mr Spry also referred to a portion of the evidence which did not appear to have been reflected in the defence. In paragraph 17 of an affidavit sworn by Mr Nigel Wallace on 21 October 2003, Mr Wallace deposes to the fact that, as a result of the plant not being in good working order as specified in the agreement, the defendant has occurred additional costs and lost production time. Mr Spry submitted that this could give rise to a further set off, notwithstanding the fact that it has not been pleaded. Having considered Mr Spry's submissions carefully I must say I remain unpersuaded that this provides an adequate answer to the claim for summary judgment for at least part of the amount claimed.

33. It is clear that a defendant must descend to at least some degree of particularity and cannot rely upon mere denials. The allegations made by Mr Wallace in paragraph 17 of his affidavit do not suggest that any particular sum has been lost as a result of the matters alleged and, as I've already mentioned, there is no defence or counter claim raising those issues or providing any particulars, either of the cause of action or of the amount of loss said to have been sustained as a result.

34. Furthermore, it seems to me that if there is a claim based upon the allegations in paragraph 17 then it is a claim which should properly be raised by counter claim. I am not satisfied, in all the circumstances, that it would give rise to a set off as distinct from the counter claim. It follows that, in my opinion, the plaintiff has demonstrated a right to summary judgment for at least the sum of $93,750.

35. The defendant however, has sought security for costs. This motion is supported by an affidavit which suggests that the likely quantum of the costs that may be incurred by the defendant in defending the proceedings by the plaintiff would be $44,858.27. As Mr Gillespie-Jones pointed out there are some difficulties with the affidavit and it is difficult to ascertain whether the deponent has the necessary expertise to provide an accurate estimate of the quantum of costs likely to be recoverable under taxation from the plaintiff should the claim against the defendant otherwise fail. Nevertheless, I accept that the expression of opinion is admissible and entitled to some weight.

36. There are some other matters which must be taken into account in determining whether such an order should be made in the present case. Mr Gillespie-Jones strongly resisted such an order on the basis that the plaintiff had demonstrated a strong prima facie case to summary judgment for a substantial sum and submitted that in these circumstances it could scarcely be said that the claim was obviously without merit. I am sure that Mr Gillespie-Jones will forgive me if I do not presently recount all of the submissions he made on this topic but I have taken into account the submissions which he forcefully and cogently put forward.

37. On the other hand, it has to be acknowledged that the plaintiff is a company in liquidation and it is at least conceivable that, if I were to order summary judgment and require immediate payment of a substantial amount of money, that money would be available to the creditors of the company and would be quite properly disbursed by the liquidator. Hence it does not necessarily follow that there would be funds available to meet an order for costs at the end of the trial should it fail. However if summary judgment were to be ordered only for the sum of $93,750, it seems to me that that would still leave a substantial claim against the defendant in relation to which the plaintiff would be very likely to succeed. That figure does not take into account the likelihood that the counter claim in relation to the costs incurred in the New South Wales proceedings will ultimately prove to be much less than the full amount pleaded because it will be reduced by the quantum of the costs recovered by Ms Sullivan. Furthermore, it does not take into account any liability which the defendant will have to the plaintiff for interest. That issue has not been litigated this morning but there will clearly be at least some interest payable to the plaintiff.

38. In short, whilst I am satisfied that the plaintiff has demonstrated an entitlement for summary judgment in the amount of $93,750, I am, on the one hand, unable to precisely quantify the further amount that must inevitably be due to the plaintiff but, on the other hand, I am confident that that further sum is likely to be sufficient to meet any liability that the plaintiff may incur to the defendant in the event that, having regard to the conduct of subsequent litigation, a judge were to regard it as appropriate to make an order that the plaintiff pay the defendant's costs.

39. In these circumstances I think it is appropriate to make the following orders. Firstly, that the plaintiff have leave to enter judgment in the sum of $93,750. Secondly, that the comparable amount paid into court be forthwith paid out to the plaintiff. Thirdly, that the application for security for costs be dismissed.

40. I order that the costs be reserved.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Crispin.

Associate:

Date: 5 December 2003

Counsel for the plaintiff: Mr I Gillespie-Jones

Solicitor for the plaintiff: Gillespie-Jones & Co

Counsel for the defendant: Mr M Spry

Solicitor for the defendant: Sneddon Hall & Gallop

Date of hearing: 21 November 2003

Date of order: 21 November 2003

Date of reasons for judgment: 5 December 2003